1) Yes, Impale does magic damage. The desciption should say so in the first line. If yours does not, then consider reviewing if you have installed HU v1.3a correctly.
2) %DR is physical resistance, it has capped at 50%, unlike other resistances which are capped at 75%. Magic resistance is a seperate resistance found only on a few items, such as emerald craft shields.
3) Diamonds can work in Hell, but they're not overpowered in Hell. If you can get your DR/MDR values around 100-200 then you'll notice the impact a lot. However, in HU v1.21z it was much easier to get your %DR and absorbs to very high levels, which made the the effects of DR/MDR too low to notice. A character using EnergyShield would greatly benefit from DR/MDR even in Hell. In Norm, try to get your DR/MDR numbers to about 10 times the act, plus 10 (e.g. 50 for a4) and you should be alright for most things. Bosses and ExtraStrong critters will still hurt you, but trash won't.
4. Runewords can be very effective. For example, my lvl 40 Volcano/Amageddon druid found a +3Volc +1Arma hat and made "Lore" in it. It's been great. I got pretty lucky I think. High level runewords are also very effective at times.
5. Melee Zons are still a novelty-class. They can be fine if geared correctly (you need more diamonds), but are a relatively challenging class. Barbs, Paladins, and Druids would have been easier classes to start with. Just about any build with them should be fine, but they are all more gear-dependant than Caster classes in Norm, so you won't have an easy time of it unless your zon has hand-me-downs to give them.
6.
FAQ point 3. However, this won't include the mods found in the text files. If you really want to, then consider decompressing the .mpq file and reviewing the text files. I recently heard that the files packed into the .mpq are the current set. You'll want to review the suffix and prefix text files using a spreadsheet program.
7.
Blue's Mercenary Page hasn't been updated in a bit, but it's a start.